OPINION: WHY BIG EUROPEAN COMPANIES ARE AFRAID TO DO BUSINESS IN UKRAINE?


Investments of new large foreign players contribute to strengthening the country’s economy and help to reach a stable level of development. While in the eyes of potential investors, Ukraine does not belong to the category of investment-attractive countries. What is the problem and why such large foreign giants like Starbucks and IKEA have not yet entered the domestic market? Mykola Siutkin, managing partner of S&P Investment Risk Management Agency explains.

Now large foreign companies, which for a certain period were represented in our market, stop their business and leave Ukraine. According to open sources, over 27 foreign companies from various industries have left this field over the last three years: Honda, Peacocks, Mexx, River Island, Praktiker, Logitech, and others.

It may take years for potential investor to make a decision about entering Ukrainian market. For example, the European “giant” IKEA has considered this step since 2005, despite economically attractive indicators and clear advantages from doing business in the domestic market.

“Dark” rules for business

The main problem of Ukraine lies in the entangled rules of doing business, namely corruption at all levels. If a foreign investor leads a transparent business, it does not mean that sooner or later the company faces problems, sometimes even criminal ones. So it turns out that business “in white” in Ukraine can be compared with military actions, and not every investor is ready to keep such defense.

Fear Factor

The decision to gain a foothold in the Ukrainian market is not based solely on financial indicators or state guarantees. Investors carefully study the market, analyze the behavior of large players and look at real cases. If, for example, they encounter cases of initiation of criminal proceedings or raider seizure of another large company, it becomes a decisive factor. The company must feel safe, have guarantees of keeping property rights and immunity from unreasonable criminal prosecution.

High Level Risks

Acquisition of real estate in Ukraine and / or entering into partnership with the Ukrainian side – high level risks. Even experienced specialists are not always able to minimize them. If you put an attractive price on one bowl of scales and possible loss of an object in a couple of years on another one , which factor prevails? Often, large companies are not willing to risk their assets and a positive reputation because of an unsuccessful attempt to conduct business in Ukraine. Therefore, they opt for franchising. This type of risk refers to the category of risks with a business partner. Level of significance is lower than the previous one, but they can jeopardize the rights of the investor to transfer rights to use the objects of intellectual property, commercial experience and business reputation to the Ukrainian side.

In order for a foreign company would be able to conduct a successful business partnership in Ukraine, it is also necessary at the zero stage carefully consider the formation of correct rules of the game and to calculate all possible risks in advance.

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